Crypto Exchanges Manipulate the Market to Encroach Investors’ Funds, Says Chinese Financial Watchdog
While manipulation is a persistent issue in the crypto market, a major Chinese financial watchdog, the National Internet Finance Association of China (NIFA) has warned investors against the increasing risk in crypto investment.
Based on the NIFA’s own data analysis, overseas crypto trading platforms have faked trading volumes. The financial watchdog also noted that some trading platforms compare virtual currencies to safe haven assets like gold. However, the recent historic crypto market crash caused significant losses for many investors.
The NIFA said it did a sampling analysis based on trading data on some of the exchanges, and per their findings, the daily trading turnover rate for over 40 coins exceeds 100%. Whereas the daily turnover rate for over 70 days exceeds 50%. Moreover, the NIFA claims despite the relatively low price and small market value there have been higher trading volumes on these exchanges.
The NIFA added that the exchanges have created the false conception in the crypto trading market by forging statistics and using bots to increase trading volumes. It said some platforms have made up trading volume by completely copying information on other platforms.
After luring investors into the crypto market, the NIFA claims these exchanges will use various manipulation methods to encroach on the investors’ funds. According to the NIFA, one of the means by which these platforms encroach users’ funds is to stagnate transactions suddenly by means of downtime, unplugging cables and freezing assets, among others. It said leverage traders can suffer heavy losses because they cannot actively close their positions and cause liquidation.
According to the financial watchdog, the majority of these crypto trading platforms are not based in China since the government banned trading activities in 2017. As a result, the NIFA claims it has been difficult for regulators to track down such companies and retrieve investors’ funds for them.